For U.S. mobile carriers, the Apple iPhone is a bit of a double-edged sword, and brings with it a number of positives and negatives. On the one hand, it’s popular and draws lots of customers to networks: for AT&T, Verizon and Sprint, the first quarter of 2012 saw several million iPhone activations on their networks.
But there are also some significant costs associated with the device that the carriers have to weather; it’s not all profits for everyone. Apple demands high subsidies for its devices because of their popularity, for example. And last year, Apple introduced iMessage, a web-based messaging service that effectively replaces text messaging between iOS customers – and that has AT&T CEO Randall Stephenson worried.
Apps and utilities such as iMessage are slicing into carriers’ bottom lines, according to a New York Times story, but just how much is tough to say. There does seem to be a significant decline in text messaging in a number of countries, the story says, and analysts think cellular companies are about to start seeing those declines in the U.S. as well. Those drops may well be due to alternatives such as iMessage and Facebook’s recently released Messenger app. Both use cellular data at a much lower cost than what carriers charge for texting plans or per message.
Speaking at the Milken Institute’s Global Conference last week, Stephenson said that texting replacement apps are enough to keep wireless executives up at night. He also said that introducing the iPhone to the network in 2009 with the option for unlimited data was a mistake, because high data usage required AT&T to invest more capital, and that the highest data users were subsidizing the lowest users.
“My only regret was how we introduced pricing in the beginning, because how did we introduce pricing? Thirty dollars and you get all you can eat,” he said. “And it’s a variable cost model. Every additional megabyte you use in this network, I have to invest capital.”
Still, Stephenson said that he doesn’t regret bringing the iPhone to AT&T’s network, largely because it helped to push the cellular industry to a data subscription-based model. It’s ironic that that reliance on app’s data use is now threatening to disrupt the cellular carriers.
